The broader market has been quite volatile this year amid the noise surrounding tariffs, recession fears, and heightened geopolitical tensions. For conservative investors, low-beta dividend stocks can provide some relief from the broader market volatility.
Midstream energy companies are especially popular among investors seeking high-yield dividend stocks, as they are known to pay substantial dividends. I find Energy Transfer (ET) a good buy in that space, especially after the recent pullback where the stock has lost over 17.7% from its 2025 highs.
Energy Transfer Cut Its Dividend in 2020
To begin with, let’s look at ET’s current dividend and dividend policy. Energy Transfer’s current dividend yield is above 7.4%, and the company intends to increase its distribution by between 3%-5% annually. However, there is a red flag if you put great emphasis on dividend certainty, as in 2020, Energy Transfer was forced to cut its distribution by half. While several companies either cut their dividends or suspended them altogether during the pandemic, some of ET’s peers, specifically Enterprise Products (EPD), increased their dividends. EPD has incidentally increased its dividends every year since it went public in 1998, and the current yield sits just under 7%.
What Could Drive Growth for Energy Transfer?
Energy Transfer has several growth drivers in its arsenal, which should bolster its earnings and, by extension, its dividends in coming years. The first is the export market, and the Flexport expansion project should enhance the company’s export capabilities. ET expects to commence ethylene export service from the Nederland Terminal in the final quarter of this year.
President Donald Trump has talked about “unleashing American energy,” and energy exports could be one way through which the country can bridge its burgeoning trade deficit. Energy Transfer has been praised the Trump administration’s energy policies, including easier permits. During the Q1 2025 earnings call, co-CEO Marshall McCrea said, “We think the decisions that this administration [makes] will be very good for our country and very good for our industry and very good for our partnership.” The other key growth driver for Energy Transfer could be the electricity demand from data centers and any potential onshoring of manufacturing activity.
Given the growth outlook, Energy Transfer has bumped up its 2025 growth capex budget to $5 billion and is working on several organic growth projects. It expects the bulk of these projects to come online between this year and the next. During the Q1 2025 earnings call, management emphasized that the “majority of the earnings growth from these projects [will] significantly ramp up in 2026 and 2027.”
ET Stock Trades at a Discount
Eventually the decision to buy any stock tends to come down to valuations. Energy Transfer stock trades at a forward enterprise value-to-earnings before interest, tax, depreciation, and amortization (EV-to-EBITDA) multiple of 8.3x, which, while being slightly higher than the average multiples over the last five years, does not look demanding considering the growth opportunity in the form of energy exports and AI. Moreover, Energy Transfer has addressed some of the previous corporate governance issues, and its balance sheet is in a much better shape now, which warrants a slightly higher multiple.
Overall, while ET stock might never be the proverbial millionaire-maker stock, it could fit into portfolios of conservative investors who are content with a stock that has a high dividend yield and can deliver some capital appreciation over the medium to long term without much risk.
ET Stock Forecast
Of the 13 analysts covering Energy Transfer, 12 rate it as a “Strong Buy,” while 1 says it’s a “Hold.” Its mean target price is $22.93, which is almost 30% higher than the June 23 closing price, while the Street-high target price of $26 is over 47% higher.
